Canada Tax Changes — Live Tracker

What changed

Budget 2024 announced an increase to the capital gains inclusion rate from 50% to 66.7% (two-thirds) for gains realised after 25 June 2024. The government confirmed on 21 March 2025 that this proposal was abandoned entirely and would not proceed. The inclusion rate has returned to and remains at 50% for all taxpayers, including corporations and individuals.

Who it affects

• Corporations with capital gains
• Individuals with investment property or share disposals
• Trusts realising capital gains
• Business owners selling shares or assets

What to do

No action required — the rate remains at 50% inclusion. If you deferred asset disposals in anticipation of this change, review your plans as the lower rate is now confirmed permanent. Consult your advisor if you made decisions based on the proposed higher rate.

What changed

The SBD active business limit remains CAD 500,000, giving Canadian-controlled private corporations (CCPCs) a 9% federal corporate tax rate on qualifying income versus the general 15% rate. The passive income phase-out rule remains in effect: the SBD limit is reduced by CAD 5 for every CAD 1 of adjusted aggregate investment income above CAD 50,000, eliminating the SBD entirely at CAD 150,000 of passive income.

Who it affects

• Canadian-controlled private corporations (CCPCs)
• Small and medium-sized incorporated businesses
• Corporations with significant investment portfolios

What to do

Monitor passive income levels annually. If your corporation earns investment income approaching CAD 50,000, consider strategies such as paying down shareholder loans, accelerating capital dividends, or investing through a holding company. Keep active and passive income streams clearly separated in your bookkeeping.

What changed

CPP2 added a second earnings ceiling above the Year's Maximum Pensionable Earnings (YMPE). In 2025, employees and employers each contribute 4% on earnings between the YMPE (CAD 73,200) and the Year's Additional Maximum Pensionable Earnings (YAMPE, CAD 81,900) — a maximum annual CPP2 contribution of CAD 342 each. Self-employed individuals pay both the employee and employer share, for a maximum of CAD 684. This is separate from and on top of existing CPP1 contributions.

Who it affects

• Employees earning above CAD 73,200 annually
• Employers with higher-earning employees
• Self-employed individuals earning above the YMPE
• Payroll administrators

What to do

Ensure your payroll system has been updated to calculate CPP2 separately from CPP1. Both contributions appear on T4 slips in separate boxes. Self-employed individuals must account for the full CPP2 contribution when calculating quarterly instalment payments. Review your payroll software for 2025 YMPE and YAMPE thresholds.

What changed

The Digital Services Tax Act came into force on 28 June 2024, imposing a 3% tax on Canadian-sourced revenues from online marketplaces, social media, online advertising, and user data services. It applies to entities with global revenues exceeding CAD 1 billion and Canadian digital services revenues exceeding CAD 20 million in a calendar year. Critically, the tax was applied retroactively to revenues earned from 1 January 2022, with the first returns covering 2022-2023 combined due in June 2025.

Who it affects

• Large multinational digital platforms
• Online marketplace operators
• Social media companies with Canadian users
• Digital advertising businesses
• Companies monetising Canadian user data

What to do

Assess whether your group meets both revenue thresholds. If applicable, ensure you have registered with the CRA and filed the combined 2022-2023 return. For ongoing compliance, track Canadian digital services revenues separately from other revenue streams. Seek specialist tax advice given the cross-border complexity and US trade implications.

What changed

Five major investment tax credits were enacted: Clean Technology ITC (30% on eligible clean energy equipment), Clean Electricity ITC (15% for eligible electricity generation and storage), Carbon Capture Utilisation and Storage ITC (37.5% to 60% depending on storage method), Clean Hydrogen ITC (15% to 40% based on carbon intensity), and Clean Technology Manufacturing ITC (30% on eligible machinery and equipment). Most credits require compliance with prevailing wage conditions to receive the full rate, with a reduced rate (typically 10 percentage points lower) if conditions are not met.

Who it affects

• Businesses investing in renewable energy equipment
• Manufacturers of clean technology products
• Companies with carbon capture projects
• Clean hydrogen producers
• Businesses building eligible electricity infrastructure

What to do

Identify which credits apply to planned capital investments before committing expenditure. Document prevailing wage compliance carefully — payroll records must demonstrate rates meet the prescribed thresholds. File the relevant schedules with your corporate return and consider engaging a specialist advisor for larger projects given the credit stacking opportunities.